Indemnity Insurance of Deed of Postponement Bank conveyancing instructions

Halifax and Barclays, like most lenders, dictate their own requirements when it comes to deed of postponement indemnity insurance. The purpose of this page to assist property law solicitors on the different bank conveyancing panel where the title to be charged includes deed of postponement. It is not a substitute for checking the CML handbook requirements for each bank, be it Santander, Yorkshire Bank Home Loans or Lloyds TSB. The information on this page is not focused on deed of postponement indemnity insurance requirements.

Need help with deed of postponement indemnity insurance from your lender?

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Godiva Mortgages and Accord as with most lenders, instructions are such that where deed of postponement indemnity insurance is to be taken out:

• you must point out to the mortgagor that the borrower must adhere to any conditions of the deed of postponement indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the insurance
• your firm is required to disclose to the insurer all relevant information which you have acquired
• your practice must supply a duplicate of the deed of postponement indemnity insurance to the borrower and explain to the mortgagor why the deed of postponement indemnity insurance policy was effected and that additional insurance could be required if there is further lending against the security of the property
• the deed of postponement indemnity insurance policy should not contain conditions that you know would invalidate or compromise the interests of the bank
• the deed of postponement indemnity insurance policy must be effected at no cost to the mortgage company
• you are responsible for approving the terms of the deed of postponement policy on behalf of the lender
• the deed of postponement indemnity insurance policy should always be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any next registered proprietor or lender. If the mortgagor will not be covered by the deed of postponement indemnity insurance policy, you must advise the mortgagor of this fact.
• the minimum level of cover for the policy must meet the requirements for the mortgage company (See Part II Handbook requirements )

Regarding the extent of cover for the deed of postponement indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the CML handbook PII requirements for mortgage companies:

Deed of Postponement Contingency Insurance : Reflections

The full terms, conditions and exclusions for deed of postponement indemnity insurance are identified in the policy document. Conveyancing Practitioners are obliged to point your non-lender client to the deed of postponement indemnity insurance policy paperwork. The intention of deed of postponement indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to ensure it is in order. The continuance of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

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Significant aspects and benefits of deed of postponement indemnity insurance :

Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Deed of Postponement indemnity insurance Policies are likely to cover the following

• Reimbursement for compensation incurred in any action in respect of the risks specified in the deed of postponement insurance, as well as solicitors charges.
• Market value reduction resulting from the successful enforcement of the risks specified in the deed of postponement indemnity insurance.
• Money paid with consent in writing from the insurance company to free the land from the risks specified in the deed of postponement indemnity insurance.
• The cost of altering or destroying all, or part of the development and the reinstatement of the land, insofar as such alteration, demolition or re-instatement is made necessary by court order.
• The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the deed of postponement policy, to the extent that such costs are rendered abortive by court decision.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer

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Always check what is not included in the deed of postponement insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?

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Additional considerations for deed of postponement indemnity insurance

Deed of Postponement Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that deed of postponement indemnity cover will not necessarily be the right solution.

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The above information is in relation to properties in England and Wales.